Twenty five years after it pioneered a savings product for minors, Commercial Bank of Ceylon continues to devote attention to developing products for children, a segment immensely important to the long-term vision of the bank. Today, children’s accounts represent about a tenth of the bank’s account base and play a noteworthy role in keeping its current account-savings account (CASA) ratio, one of the healthiest in the local banking sector. In this interview, Commercial Bank Deputy General Manager Personal Banking Sandra Walgama elaborates on the bank’s focus on children.
There seems to be a growing emphasis in Sri Lanka on the banking products for children. How does Commercial Bank view this trend?
Commercial Bank has always considered children a very important segment, both in terms of the products it offers as well as in terms of its corporate social responsibility initiatives. We in fact pioneered the savings product for children with the Isuru Minors’ Saving Plan in 1991. It is a unique savings product and is one of the best performing products in its category, having evolved over the past 25 years. Banking products for children continue to receive a lot of attention at Commercial Bank, because we believe in its potential and the fact that they build a very worthy customer base in the Future.
What products does the bank have for this segment?
The Isuru Minors’ Savings Plan is one of our principal savings accounts for children. It is a product that has been periodically improved with the addition of new features. Earlier this year, we launched Isuru VI, increasing the guaranteed amount receivable to Rs.8.8 million, when the child turns 18. Another equally popular children’s account is the Arunalu savings account, which is linked to a scheme that rewards high achievers at the Year 5 scholarship examination each year.
What makes these products special?
Let’s look at the Isuru Minors’ Savings Plan first. It covers the period from birth to majority – age 18 – and offers parents two savings options – a monthly deposit scheme or a lump sum deposit scheme, whichever suits their financial capacity. Under the lump sum deposit scheme, the guaranteed amount the bank will pay when the child turns 18, depends on the age of the child at the time the account is opened. Parents may deposit between Rs.5,000 and Rs.1 million at any time between the day the child is born and the child’s 10th birthday. A deposit of Rs.1 million at birth will guarantee the child a payment of more than Rs.5.7 million at the age of 18.
Under the monthly deposit option, the guaranteed amount depends on factors such as age of the child, agreed amount of the monthly deposit and the deposit period. The account could be opened for children between the ages of one day and 10 years and the parents may choose to save between Rs.500 and Rs.20,000 (in multiples of Rs.500) a month, for five or 10 years. A 10-year savings plan opened at birth of a child with a monthly commitment of Rs.20,000 will guarantee a payment of Rs.8.8 million, when the child turns 18.
For parents who wish to save for their children, these figures are attractive, but what makes Isuru Minors’ Savings Plan extra special is the fact that the bank undertakes to pay the final guaranteed amount when the child turns 18, even in the event, the monthly deposits being interrupted due to the untimely demise of the depositor.
And what are the unique features of the Arunalu children’s account?
The distinguishing feature of the Arunalu children’s savings account is its cash rewards scheme for high achievers at the Year 5 scholarship examinations. Every year, Arunalu account holders have the opportunity to win cash prizes from the bank if they are placed first, second or third at the national, district or school levels at the scholarship examination. This is intended to inspire young students and emphasise the value of good education.
The bank pays up to Rs.382,500 to the top three scorers islandwide at the Year 5 scholarship examination usually held in August every year, if they are Arunalu account holders. On this basis, the student or students placed first will receive up to Rs.170,000 in monthly instalments of Rs.2,000 till the age of 18. Similarly, students placed second in the island will receive up to Rs.127,500- in monthly instalments of Rs.1,500, while those placed third will receive up to Rs.85,000 in monthly instalments of Rs.1,000 each.
Even if there are multiple winners within the top three ranks in the country, Arunalu rewards all such winners on the above basis. For instance, in 2015 there were 11 winners within the top three at the Year 5 scholarship examination and Arunalu paid Rs.635,000 to all 11 winners.
Additionally, Arunalu account holders ranked first in their respective districts at the examination receive up to Rs.50,000 and the account holders who are placed first, second and third in their schools receive cash prizes of Rs.10,000, Rs.7,500 and Rs.5,000 each, respectively.
In the four years from 2012 to 2015, we paid a cumulative Rs.21.2 million in cash prizes to Arunalu account holders, who excelled at the Year 5 scholarship examinations and in 2015 alone, the bank paid out Rs.5.5 million under the scheme to 675 students placed first, second and third in their schools at the Year 5 scholarship examination. This was in addition to the cash rewards paid to eight students who were placed first, second and third in the island at the examination.
How successful have these products been?
They have been extremely successful and very popular among parents. Today children’s accounts represent about a 10th of our total accounts and we feel there is potential for further growth.
What are the factors that have contributed to the success of these products?
First and foremost, these products appeal to the instincts of parents. The next important factor is trust. Since these are long-term products, parents look for a bank that is stable and trustworthy and in those aspects Commercial Bank stands out. Being the most respected bank in Sri Lanka for the 11th consecutive year and the second ‘Most Respected’ corporate entity in the country for the fifth consecutive year in the annual LMD rankings, Commercial Bank was also ranked No 1 in Sri Lanka for ‘Honesty’ for the third successive year. The rates of interest and the final guaranteed sum are also important factors. Added to all these factors are the features, which are improved periodically as the products and the market evolves.
Given the features of the banking products for children, are they profitable/sustainable for the bank?
Yes they are. Our children’s savings products represent a win-win for the parents and the bank. Additionally, from the bank’s point of view, children’s accounts are our future adult customers, so building a relationship with this segment makes sense.
How do you see these products evolving in the years ahead?
Children’s banking products will continue to thrive and the bank will continue to look for exciting and innovative new features to add on to this product range.